Lending to developed country banks fell in Q2

PaulHannon

LONDON -- Banks cut their international lending to each other during the second quarter, and in particular their claims on banks in the U.K. and the U.S., according to a report released Wednesday by the Bank for International Settlements.

The BIS said total cross-border lending fell by $185 billion, or 0.6%, in the three months to the end of June to stand at $35.6 trillion. Cross-border lending rose by $634 billion in the first quarter.

Banks withdrew dramatically from international lending in the wake of the financial crisis, often repatriating foreign assets to compensate for losses taken at home. For the last year, lending has followed an uneven pattern.

The pull-back from lending to other banks is likely to reflect concerns about the impact on their credit worthiness of strains in government finances, although neither the U.K. or the U.S. have been the focus of investor concerns.

Lending to banks in developed economies fell by $296 billion. Lending to U.K. banks fell by $94 billion, while lending to U.S. banks fell by $128 billion and lending to German banks fell by $25 billion. However, lending to French banks rose by $56 billion.

By contrast, lending to developing economies rose for the ninth straight quarter, by $145 billion. That was a slower expansion than in the first quarter, when lending rose by $194 billion.

Lending to China rose by $68 billion, to Brazil by $22 billion, and to India by $9 billion.

When adjusted for exchange-rate movements, lending to the euro zone rose by $14 billion following a decline of $56 billion in the first quarter. Lending to the three members that have had to seek bailouts from the European Union and the International Monetary Fund declined. Lending to Greek borrowers fell by $14 billion, while lending to Irish borrowers fell by $17.5 billion and lending to Portuguese borrowers fell by $12 billion.

Lending to Italian borrowers rose by $12.7 billion, while lending to Spanish borrowers fell by $185 million. Lending to French borrowers rose by $98 billion, while lending to German borrowers fell by $53 billion.

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